During the last decade the Welfare State has undergone incessant criticism as it is being considered an additional burden on the economy. It is true that changing demographics are increasing pressure on state coffers but lately it is getting convenient to hotchpotch economic ills and make the Welfare State a culprit of. Conventional thinking among most economists goes as far as to regard retrenchment, downsizing and rollback as the only words that describe best the way forward for welfare. Others supplement the latter ideas along with the introduction of market instruments that can possibly lead to the ‘privatisation’ of welfare.
However, this recession has confirmed two important basic elements for the well-functioning of a developed society. We cannot solely rely on markets and welfare handouts are necessary to avoid any unrest caused by economic hardship. As sociologist Professor Anthony Giddens correctly advocates, these times of rapid change require a new set of ideas that move on and start to view welfare positively. Policy makers need to search for new ideas and consider all options that can possibly alleviate future problems.
Going back some decades when European welfare states were at their infancy and poverty was much more visible, governments started to conceive social safety nets. At the time families were also more numerous as children served as a form of ‘future insurance’ against old-age poverty, something still observed in poor Africa. The unintended consequence of such legislation was that families shifted the ‘burden’ of ageing onto the government with all the risks it entails. As families were guaranteed a pensionable income and economic well-being started to flourish, the need for numerous children was no longer essential. Changing lifestyles and women emancipation lead Europe to face its lowest fertility rates in history.
The European Commission in its Green Paper of 2005 “Confronting demographic change: a new solidarity between the generations”, reckons that there has never been in history economic growth without population growth. Thus as Bongaarts (2008) puts it, European welfare states expenditure needs to be re-prioritised in order to reverse a declining population and ensure fiscal solvency in the future. Bongaarts asserts that in the present decade the introduction of pro-natalist policies in certain European Member States have been successful as fertility rates have started to recover.
In one of his research papers he outlines the benefits pro-natalist policies have vis-à-vis old-age dependency. Using different fertility variants he concludes that with an additional slight improvement to current fertility rates Northern European Member States followed by Western ones will considerably reduce future old-age dependency ergo making the welfare state more sustainable. Meanwhile, Southern and Eastern European Member States face higher challenges compared to the rest of Europe due to lower fertility rates explained by the lack of adequate family oriented investment. It is such Member States that have to double the effort and stop managing a system of passive welfare.
An appropriate ‘positive welfare state’ which promotes work and generous family benefits is the new formula which Europe needs if it is willing to restore its economic powerhouse. Politicians and economists should not seek the easy way out and substitute re-allocation with downsizing. It is the make-up of welfare legislation that is out-dated and not the principal concept. We need to look at such issues in a new different manner but first we need to look what’s inside the box and then we can start seriously thinking of how we can get out of it.
Clyde Caruana is a statistician at the National Statistics Office
